Confluent (Confluent) Predictability Rank

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What is Confluent Predictability Rank?

Not Rated

Warren Buffett said many times that the companies he likes are:

1. Simple businesses that he understands
2. that have predictable and proven earnings and
3. with economic moat
4. those can be bought at a reasonable price.

It is hard to quantify "simple businesses that he (Buffett) understands", so we will focus on the other three characteristics instead. In GuruFocus Research: What worked in the market from 1998-2008? Part I: Introduction of Predictability Rank, we will show that the businesses that have predictable and proven earnings are usually also simple businesses that an average person could understand.

GuruFocus conducted a back test study of Warren Buffett's strategy of "buying good companies at fair prices" for the years from 1998-2008.

Confluent Predictability Rank Calculation

In our database there are 2403 stocks that have been traded from Jan. 2, 1998 to Aug. 31, 2008. We have the complete 10-year financial data and trading prices of these companies for this period. We rank the predictability of these companies based on the consistency of their revenue per share and EBITDA (earning before interest, tax, depreciation and amortization) per share over the past ten fiscal years, and study the correlation between the stock performances and the predictability of the business.

Our study may be subject to these biases and assumptions:

Dividend yields are not counted for investment returns
Effects of price changes due to spin-offs may not be fully adjusted
Study is subjected to survivorship bias due to de-listing, bankruptcy, LBO, M&A, etc.

The correlation between business predictability and investment returns of a company is showed below.

Correlation Between Business Predictability and Investment Returns

	Predictables	Non-Predictable	All stocks
Total Number of stocks	570	1833	2403
Total Lost Money	61	830	891
Total Lost More Than 50%	18	412	430
Total Lost More Than 90%	4	86	90
Average Gain	260.6%	100.0%	138.1%
Median Gain	150.0%	13.0%	39.0%
Maximum Gain	2852.0%	11483.0%	11483.0%
Maximum Loss	-100.0%	-100.0%	-100.0%
Annualized Average Gain	12.7%	6.7%	8.4%
Annualized Median Gain	8.9%	1.1%	3.1%

For the 570 predictable companies, we have seen strong correlation between the predictability of businesses and the stock performances over the past 10 years, regardless of the valuation of business at 1998. Accordingly, we have ranked the business predictability from 5-star to 1-star, as shown in this table.

Predictability Rank	5-Star	4.5-Star	4-Star	3.5-Star	3-Star	2.5-Star	2-Star	1-Star (non-predictable)	Average among all
% Out of All 2403 Stocks	3.3%	2.9%	3.7%	3.3%	3.3%	3.7%	3.3%	76.3%	100%
% that are in Loss (10y)	3%	10%	8%	9%	11%	18%	16%	45%	37%
Average Gain (10y)	364.6%	330.9%	278.0%	235.1%	243.5%	227.8%	154.8%	100.0%	138.1%
Median Gain (10y)	238.5%	193.5%	171.0%	159.0%	132.5%	113.5%	87.0%	13.0%	39.0%
Maximum Gainer	2228.0%	2547.0%	2452.0%	2852.0%	2432.0%	1892.0%	1807.0%	11483.0%	11483.0%
Maximum Loser	-82.0%	-53.0%	-67.0%	-100.0%	-83.0%	-100.0%	-78.0%	-100.0%	-100.0%
Annualized Average Gain	15.4%	14.6%	13.2%	12.0%	12.2%	11.7%	9.1%	6.7%	8.4%
Annualized Median Gain	12.1%	10.6%	9.8%	9.3%	8.2%	7.3%	6.0%	1.1%	3.1%

For detailed information about each predictability rank, please go to GuruFocus Research: What worked in the market from 1998-2008? Part I: Introduction of Predictability Rank

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Confluent (Confluent) Business Description

Industry

GURUFOCUS.COM » STOCK LIST » Technology » Software » Confluent Inc (NAS:CFLT) » Definitions » Predictability Rank

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Traded in Other Exchanges

CFLT:Mexico 8QR:Germany 8QR:Germany

Address

899 West Evelyn Avenue, Mountain View, CA, USA, 94041

Website

https://www.confluent.io

Confluent Inc is a new category of data infrastructure designed to connect all the applications, systems, and data layers of a company around a real-time central nervous system. Its products include Confluent Platform; Connectors; ksqlDB and others. The company generates revenue from the sale of subscriptions and services. Geographically, it derives a majority of its revenue from the United States. It provides solutions to Financial Services; Insurance; Retail and eCommerce; Automotive; Government and other sectors.

Executives

Rohan Sivaram	officer: Chief Financial Officer	C/O CONFLUENT, INC., 899 W. EVELYN AVENUE, MOUNTAIN VIEW CA 94041
Chad Verbowski	officer: SVP of Engineering	C/O CONFLUENT, INC., 899 W. EVELYN AVENUE, MOUNTAIN VIEW CA 94041
Ying Christina Liu	officer: Chief Accounting Officer	C/O ZENDESK, INC., 1019 MARKET STREET, SAN FRANCISCO CA 94103
Edward Jay Kreps	director, 10 percent owner, officer: Chief Executive Officer	C/O CONFLUENT, INC., 899 W. EVELYN AVENUE, MOUNTAIN VIEW CA 94041
Erica Schultz	officer: President, Field Operations	C/O NEW RELIC, INC., 188 SPEAR STREET, STE. 1200, SAN FRANCISCO CA 94105
Michelangelo Volpi	director	C/O HORTONWORKS, INC., 3640 W. BAYSHORE RD., PALO ALTO CA 94303
Stephanie Buscemi	officer: Chief Marketing Officer	C/O IHS INC., 15 INVERNESS EAST WAY, ENGLEWOOD CO 80107
Jonathan Chadwick	director	3401 HILLVIEW AVENUE, PALO ALTO CA 94304
Lara Caimi	director	C/O CONFLUENT, INC., 899 W EVELYN AVENUE, MOUNTAIN VIEW CA 94041
Steffan Tomlinson	officer: Chief Financial Officer	PALO ALTO NETWORKS, INC., 3300 OLCOTT STREET, SANTA CLARA CA 95054
Eric Vishria	director, 10 percent owner	2965 WOODSIDE ROAD, WOODSIDE CA 94062
Sequoia Capital Fund, L.p.	10 percent owner	2800 SAND HILL ROAD, SUITE 101, MENLO PARK CA 94025
Index Ventures Vii Parallel Entrepreneur Fund (jersey), L.p.	10 percent owner	C/O EFG WEALTH SOLUTIONS (JERSEY) LTD, NO. 1 SEATON PLACE, ST. HELIER Y9 JE4 8YJ
Sequoia Capital Fund Parallel, Llc	10 percent owner	2800 SAND HILL ROAD, SUITE 101, MENLO PARK CA 94025
Index Ventures Vii (jersey), L.p.	10 percent owner	C/O EFG WEALTH SOLUTIONS (JERSEY) LTD, NO. 1 SEATON PLACE, ST. HELIER Y9 JE4 8YJ